US regulators are to give companies a chance to provide a fuller explanation of the huge paper losses they are being forced to record under controversial accounting rules, in a move that could help them to cushion the blow of the credit crunch.
The new guidance, likely to be issued by the Securities and Exchange Commission in the next few days, stops short of Wall Street demands for a suspension of the “fair value” rules that require companies to mark assets to current market value.
But it underlines the SEC’s interest in an issue that is of crucial importance for financial groups, whose balance sheets and share prices have been rocked by the liquidity squeeze.
Wall Street executives argue that a large portion of the losses recorded under fair value accounting will never materialise because the assets will not be sold until their value recovers.
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